85 Years after Repeal, Prohibition Lingers in Your Beer

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On December 5, 1933 the federal government’s nationwide prohibition against alcohol ended. Eighty-five years later, the beer market seems to have finally recovered. Today, there are more than 6,000 breweries—more than at any time before or since Prohibition—making a seemingly endless variety of beer for us enthusiasts to enjoy. But, while we may be living in the “golden age” of beer, the specter of Prohibition remains. Its effects continue to influence how beer is made, how it can be sold, and how much it costs. More worrisome, the mindset that led to Prohibition has never fully changed—it’s simply become more sophisticated. And, unless those who make and enjoy alcoholic beverages take a unified stance on principle, we could soon be living under Prohibition 2.0.

What few people realize about Prohibition is that it was not the product of some larger cultural movement that recognized the harms of alcohol on society. It was a lobbying campaign by a small group of moralists that succeeded by playing on growing xenophobic and racist sentiments. The beer industry was dominated by German immigrants, while distilling was largely run by Jewish families (considered foreign no matter where they were born). Together, these immoral foreign influences—according to the temperance movement—corrupted black men who, under slavery had been “protected” from alcohol and, as a result, “developed no high degree of ability to resist its evil effects.” Some, like Rep. John Newton Tillman (D-AR) even argued that banning alcohol would bring an end to the southern lynching of black men and boys because it would cause them to commit fewer crimes.

Modern prohibitionists are not so crude as to believe that advocating for total bans of alcohol will ever be successful, nor are their arguments as crass as they once were. Instead, they now advocate for an ever-increasing number of small, sensible limitations to protect “vulnerable” individuals in our society from the evils of alcohol. These may include bans on certain products deemed too dangerously high in alcohol or, more commonly, making sure that alcohol prices are high and availability low.

At the heart of these arguments is the idea that the only thing preventing us (and by “us” I mean those of us who are poor or persons-of-color) from wasting time and income on alcohol are laws that prevent alcohol from being too cheap or too easily available.

The arguments are subtler and the demands less extreme, but the underlying principles are the same: adults are too weak or stupid to resist the marketing or temptation of Big Alcohol. Unfortunately, the level of unity among alcohol producers and consumers in fending off these proposals is also about the same as it was before Prohibition. That is to say, it is nonexistent.

Take, for example, my beloved craft beer. Prohibition did a number on the beer industry. For most of the previous century, drinkers had one or (in a big city) two choices in beer because the industry was dominated by a handful of breweries and nearly impossible to break into for small breweries. This was, largely, thanks to Prohibition, which forced the 1,500 breweries operating before 1920 to close permanently. For the few that managed to survive the ban on alcohol by selling ice cream or non-alcoholic malt beverages, they faced an enviable situation: a nation full of thirsty consumers and almost zero competition.

While lack of competition allowed the remaining breweries to dominate the market, post-Prohibition era laws virtually locked out new breweries. Every state enacted some type of “three tier” distribution system which prevented breweries from selling beer directly to retailers. As a result, breweries needed to find a distributor (or wholesaler) to sell their beer. Since, in the wake of Prohibition, most of these family-owned businesses sold only the beer produced by one or the other mega-brewery, convincing them to break loyalty and carry a competitor’s beer was no easy task.

The hurdle these laws created for small breweries can’t be overstated, and eliminating this archaic rule would be the best way to overcome the threat of a beer monopoly, as I have written about before. But, thanks to the grit and determination of a few small breweries who slowly managed to change America’s beer tastes, distributors ultimately began to recognize the value of carrying craft. On top of its growing popularity, its higher price allowed distributors to make more money carrying less beer.

Still, it took almost a century for craft beer to capture just under thirteen percent of the beer market in the U.S. And, given how hard-won its slice of the market is, it makes sense that craft defends it from big beer with vigor. But, as in the days before Prohibition, craft seems sometimes blinded by its rivalry with big beer to the detriment of the entire industry.

Though some argue it is necessary to starve big beer of as much revenue as possible to prevent it from using that revenue to lobby against craft, big beer hasn’t (at least at the federal level) seemed interested in doing this. Rather, big beer seems to focus its lobbying attention on efforts that help the entire beer industry.

Take, for example, taxes. Back in 2013 the Brewers Association (the craft beer industry trade group) supported legislation in Congress that would reduce the federal excise tax on beer for small brewers—which it defined as those producing fewer than six million barrels a year. Perhaps feeling left out, the Beer Institute (the trade group representing large breweries) lobbied for its own excise tax bill, the Brewers Excise and Economic Relief Act of 2013 (BEER Act). This bill would have kept the definition of small brewer to those making fewer than two million barrels, but for those small breweries it would have cut the excise tax in half or more. It also, of course, would have created a tax break for the largest breweries.

While the BEER Act, supported by big beer, would have saved small breweries significantly more money, the craft industry fought against it (which created some tension within the craft industry). The reason, according to the Brewers Association, was that the BEER Act would cost the government too much money in tax revenue. But, it doesn’t take a genius to figure out that the real problem was that the BEER Act saved their competitors money.

The good news is that both sides of beer, big and small, eventually managed to come together and support a single bill that reduced the tax on all breweries. But, the reductions were smaller than they would have been (especially for the smallest breweries) than if they had supported the big beer bill.

For craft, big beer is the enemy. But, for big beer, the biggest threat to sales is not from craft beer, but from wine and liquor. This might explain why big beer’s federal lobbying has focused exclusively on making beer competitive with other alcoholic beverages, by reducing excise taxes and averting tariffs: measures that would save all breweries money.

Given that a single big beer company has more money to lobby than the entire craft industry combined, this could maybe be seen as a good thing. Rather than opposing each other at every turn, like alcohol producers did before Prohibition, craft beer should probably find more ways to work with big beer or, at least, support its efforts when they help the industry. And, since alcohol as a whole is under increasing attack from people who want nothing short of total abstinence (a.k.a. neo-prohibitionists) the beer industry should probably be looking for ways to work together and work with the other alcohol sectors to fight back. If they don’t, we may not be celebrating Repeal Day for that much longer.